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EU leaders agree budget cuts, MEPs brace for strife

After 24 hours of talks, EU leaders have struck today (8 February) a deal on the 7-year budget clamoring success, but have set themselves on a collision course with Parliament, which prepares to fight off the decision to cut spending that reflects austerity undertaken by many EU countries.

The long-term EU budget for 2014-2020 agreed today (8 February) is smaller than it was back in 2007-2013. It goes down to 1% from 1.12% of EU GNI. It is the first net reduction to the EU budget in the Union’s history.

The EU leaders’ agreement sets the figure for “commitments” – the maximum amount of money allotted during the seven-year period – at €960bn, while budget “payments” – the amount of money that can actually be spent – have been severely reduced by €34bn to €908.4bn.

With regard to the different spending headings, the figures from the final text agreed by EU leaders differ little from those announced in the morning.

The most visible difference appears to be the increased rebates for Netherlands (from €650 to €695 million per year) and for Sweden (from €160 to €185 million per year), as well as a new country receiving a rebate – Austria, with a total of €60 million for the next three years, compared to the draft text circulated in the morning.

"Is this your dream budget? I would say if I were alone, no, it would have been different," French President François Hollande said after the summit.

“The agreement is a good agreement as it gives predictability for investors to create growth and jobs,” German Chancellor Angela Merkel said at her presser held at the same time, adding that it was important to show that the EU is capable to achieve results.

Commission President José Manuel Barroso said that despite the fact that the levels agreed below what the EU executive considers desirable, the deal remains “an important catalyst for growth and jobs”.

Parliament political leaders say will reject deal

However, the leading MEPs took a completely different view.

“The European Parliament cannot accept today's deal in the European Council as it is. We regret that Mr Van Rompuy did not talk and negotiate with us in the last months,” the leaders of the four largest political groups stated in a press release published before the summit ended.

“Large gaps between payments and commitments will only store up trouble for the future and not solve existing problems,” the four leaders stated.

European Council President Herman Van Rompuy said the difference between commitments and payments was in the order of 5% and the EU executive had taken measures to narrow it down, not allowing for the deficit to mushroom.

Asked how he expected to strike an agreement with the Parliament, Van Rompuy said the leaders of the four political groups had reacted before completion of formal discussions.

Indeed, the press release of the four presidents was issued before the end of the summit, at a moment when according to sources Van Rompuy was pushing to add texts allowing more flexibility in the use of the budget. Such texts indeed appear in the final “Multiannual Financial Framework”.

He said that EU leaders had assumed their responsibility, and now the Irish Presidency would enter in dialogue with the European Parliament on a number of subjects, including flexibility of spending. Then, the Parliament would also assume its responsibilities, Van Rompuy said.

“One has to think twice before rejecting this European budget. Because for the people, for the enterprises, for employment, for youth, for youth employment, for prosperity, the stakes are really high,” he said.

Van Rompuy also said his services had been in permanent contact with the European Parliament, which goes against what said by the four Presidents.

The leading MEPs said they remain firm on the respect of Article 310 of the Treaty which requires a balanced budget, and outlined several conditions for rubber stamping a deal, including genuine own resources for the EU budget to gradually replace the current system based on national contributions.

It remains unclear if MEPs will chose to veto the budget as agreed by EU leaders by secret vote, which lowers the chances that it could be passed.

Speaking after the summit, UK Prime Minister David Cameron said that the British people should be proud of the result of the summit in cutting "Europe's seven-year credit card limit" as he described the payments ceiling.

Cameron said that his role in the summit had not been made more difficult following his January speech in which he held out the promise of a referendum on EU membership in the event of his re-election in the UK's 2015 general election. He also said that he had worked effectively with other leaders at the summit, particularly with the Netherlands' Mark Rutte and Germany's Angela Merkel. In response to questioning about a possible secret ballot by the European Parliament on the issue of the budget, which could threaten to derail the fiscal measure, Cameron said he hoped the Parliament would be constructive. But he said he found it "absolutely baffling" that a Parliament should engage in a secret ballot on a very important fiscal vote. It was not very democratic, "and I sort of thought that is what Parliaments are about," he said, adding; "That's something we British know about."

Commenting on the compromise reached by EU heads of state and government on the future EU budget or financial framework (2014-20) Greens/EFA co-president Dany Cohn-Bendit said EU leaders simply lack the will to work together to achieve more in Europe.

“In their vigour to defend obsolete rebates and shortsighted national interests, they are completely undermining Europe and the prospect of the EU budget playing a meaningful role in response to the current crisis,” he said.

“The cobbled-together nature of this compromise for the EU's coming 7 year budgetary period - falling short both in structure and overall ambition - will make it impossible for the EU budget to serve as a real instrument for relaunching our economy and promoting sustainable economic recovery,“ Cohn-Bendit added.

Party of European Socialists (PES) President Sergei Stanishev stated that “we are disappointed at the ‘lowest-common-denominator’ approach that was prevalent throughout these negotiations.”

“Ideally, we would have preferred it if cuts to the EU Budget could have been avoided, but national economic and political considerations in the EU is always a balancing act. We hope that lessons can be learned from this summit,” he said, hailing at the youth guarantee adopted by EU leaders.

“Our leaders have ensured that 6 billion euro of the budget will be dedicated to developing urgent youth guarantee’s across Europe. But we are committed to ensuring that more funding is secured. We need 10 billion euros to make the youth guarantee truly Eopean-wide,” he added.

EU Budget Commissioner Janusz Lewandowski said: “The cuts are painful, will be painful for those beneficiaries, yes, however, this summit was only the first chapter of the story. The Council, the European Parliament and the Commission must now write together its second and final chapter, the one that will enable the Council to draft a regulation for the next financial period and the Parliament to agree to it.”

Reacting to the conclusion of the European Council on the EU long-term budget, Natalia Alonso, Head of Oxfam's EU Office, said that the “ freezing of the EU’s anti-poverty aid is a breach of faith. “

“The promise to give 0.7 per cent of national income by 2015 to the poorest is off track. EU leaders, like all other countries, should be held accountable for their commitments," she added.

The European Trade Union Confederation (ETUC) deplores the Budget agreement and said it is a bad signal for the European Union.

European employers welcomed a deal has been found but regretted the missed opportunity to reorient it to growth.

“BUSINESSEUROPE has repeatedly called on EU leaders to safeguard the proposed budget for research and innovation, trans-European networks and to give visible support for SMEs. Although these areas have been increased compared to the previous budgets, leaders have failed to give the necessary clear signal that Europe is focused on the future” – said BUSINESSEUROPE Director General Markus Beyrer.

EESC president Staffan Nilsson stressed the mismatch between what the leaders of the EU Member States have agreed on the EU's long-term strategy for job-creation and policies for sustainable growth, innovation, education and research, and what they have agreed on how these policies are to be implemented.

“To compete on the international stage, we need to work for a single, stronger EU economy. A strong budget forges a stronger, social, inclusive and responsible European economy,” he added.

Background

EU leaders have met in Brussels on 7-8 February to forge a deal on the Union's 2014-2020 budget.

The European Commission proposed a draft budget for 2014-2020 which represents a freeze in spending in spite of the Union having gained new competences under the Lisbon Treaty.

The 22-23 November 2012 summit ended without an agreement, as some leaders reportedly tried to slash further Van Rompuy’s latest budget proposal (of €973 billion) by an additional €30 billion.

The European parliament has played the role of defenders of a Union that must give itself the means for its ambitions. Under the Lisbon Treaty, MEPs now have the opportunity to approve or reject the EU budget adopted by EU heads of state and government as a whole.